With New Outsourcing Deal, BlackBerry Cancels Two Phones

A small item from BlackBerry’s earnings-related filing Friday got lost in the news of its hardware partnership with Taiwan’s Foxconn Technology Group–sales of its new phones have been so bad that BlackBerry was forced to cancel the rollout of two not-yet-released phones.

BlackBerry’s announcement Friday that it will start outsourcing its hardware business to Foxconn was greeted with enthusiasm by investors, who pushed that stock up 15.5%. In recent trading Monday, the stock was up another 5.4%.

In the filing with the U.S. Securities and Exchange Commission, which detailed the weak sales of its current crop of phones, BlackBerry said it made the decision to “cancel plans to launch two devices to mitigate the identified inventory risk.” The Waterloo, Ontario-based company wrote off nearly $1 billion in unsold phone inventory in the fiscal second quarter and another $1.6 billion in the third quarter.

Those canceled phones, according to a person familiar with the matter, were internally code-named Café and Kopi, and were low-cost phones aimed at emerging markets. The timing of the launch of the phones was unclear.

Foxconn will now take over the making of low-cost phones, BlackBerry’s interim chief executive, John Chen, said Friday. The first of the phones from that partnership, nicknamed Jakarta, will be launched around April, according to Chen.

But BlackBerry is still working on several higher-end devices, internally code-named Ontario and Windermere, according to the person familiar with the matter. Its most recent higher-end devices, the Z10 and the Q10, have flopped.

Chen said last week that eventually he would prefer that Foxconn take responsibility for the hardware side of all of the company’s phones, even the high-end devices.